I’m a mid-30s single woman currently living in the Midwest. Before that, I spent over a decade on the east coast, where I first worked in theater and then got a PhD in the humanities. Believe it or not, being first a starving artist and then a graduate student is not the path to fame and fortune — I know, it comes as a surprise to most people — so I’ve got a lot of catching up to do. 🙂
How did you acquire $23,697 in debt? What did that debt consist of?
I had a little less than $19000 in student loan debt, all acquired during my graduate education (earlier I had loans from undergrad, but they’d been paid off already).
Why did I have it? Non-frugality, mostly. My program was fully funded and paid me a stipend to teach, and I also picked up freelance work during the entire 8 years I was in grad school (some years more than others.) I couldn’t tell you exactly what the $19K went on; living in a nicer apartment than I might have, going out to dinner more often, whatever….
The total consisted of three loans. When I took the first one out, interest rates on a CD at ING Direct (now Capital One 360) were around 5%. I took out a subsidized Stafford loan for $8500, meaning that the government was going to pay the interest until I graduated.
I thought I was smart: I would put it in a series of CDs and let it earn interest until I paid it back. I did buy a CD…but when it matured, I spent it instead. Sigh.
The other roughly $10,000 I took out during the one year I didn’t teach. Technically I mostly used it to fund a research trip, but again, I could have avoided needing it by being more frugal. Anyway. I also had recently picked up $5000 in credit card debt between moving expenses, buying some furniture (because at that point I only owned a couple of night tables and a dresser) and summer travel. So I count it as being officially a $23,697 debt starting from my graduation date, June 2013.
What did it feel like to have that much debt?
At first I didn’t feel so bad about it; I wasn’t really pleased or anything, but I felt like I was just going to make extra payments as often as I could and see what happened. By New Year’s 2014, though, I was six months in and I had made some payments but I looked at the numbers and I started to panic because I still didn’t have a job set up for July 2014, which was when my first contract ended. That’s when I got really worried.
I know it’s “not that much” in the grand scheme of people’s debts — in the blogging world I’ve encountered people with hundreds of thousands of dollars worth of debt, not including a mortgage! — but at the time I had no guarantee I’d get paid employment after that job ended. I was also in my mid-30s with zero saved for anything — emergencies, retirement, whatever. So I was kicking myself for the loan debt especially because my salary on that contract was pretty nice and I thought “I could have a nice savings account but instead I have to pay off this debt!” Because I didn’t know if I’d be unemployed in July 2014 or not and I didn’t want to be in a position of owing a lot of money.
How long did it take you to pay it all off?
I made a really intense push (over 60% of my income for the last three months) and paid off the student loan debt at the end of June 2014, a year after I graduated. By then I knew that I did have another job lined up so I calmed down a little and started working more seriously on a retirement fund while I worked steadily at the last of the credit card debt (I’d put it on a 0% interest card so there wasn’t as much of a rush.) I paid the last of that in December 2014. So a total of 18 months.
What resources did you use to help you through this process?
I hear a lot of horror stories about student debt repayment but I actually had two good experiences with my servicers. Their websites were easy to use and had good tools for seeing how my repayment schedule would be affected by various moves. It probably helps that I only had one loan with each so there weren’t the issues people often seem to have with the servicer applying an overpayment to the wrong loan.
I got a Mint account in July 2013, right at the start of my journey, and I used that to keep track of my account balances but I didn’t find it particularly helpful for actually budgeting, which probably helps to explain why the first six months went so much slower — I wasn’t really planning ahead with anything other than this vague goal I had of getting the student loans paid off in a year. Towards the end, I discovered YNAB and even though I feel like people are kind of creepily evangelistic about it sometimes, I have to say I really like using it and have found it helpful in terms of figuring out what it’s going to take exactly to get from point A to point B, financially.
Last but definitely not least: personal finance blogs! I found the blogging world around February or March of 2014, not long after I really started to panic about my debt, and it’s been incredible. At first it was just so soothing to read about other people paying off debt, and then I started to really learn stuff about budgeting and planning. I didn’t have much financial education before other than “be at least sort of frugal and try not to get into catastrophic situations” so it’s been wonderful.
Did you face any challenges along the way?
Oh, yes. Challenge #1 was me! I didn’t have a clear plan for how I was going to pay off the debt, which led to overspending during most of the first year of payoff time. I ended up having to really scrimp and make *huge* payments towards the end when I could have spread it out if I’d made some smaller sacrifices also spread out more evenly.
Another bump in the road was when I got hit with a pretty big tax bill in February 2014 and didn’t make more than the minimum payment on my loans that month. It wasn’t a good feeling to see them stay level and it really pushed me to work harder for the next few months to make bigger payments and catch up.
How did this affect your marriage?(if applicable)
Nope! Don’t have one 🙂 On my blog I reflect a lot on dealing with money as a single person who doesn’t have an overwhelming income — I do okay now that I’m finally out of school, but I make way less than I would if I were in the corporate world, given my level of education. And it can be more than a little scary knowing that I pretty much have me to rely on. I could fall back on family or friends, sure, but I’d rather not do that!
What were you doing for a living while you were paying off the debt?
Working in higher education. I paid off the student loans on a one-year contract with one college, and I dealt with the last of the credit card during the first six months of a two-year contract with another…for which I took a serious pay cut. Academia is weird. (It’s not that my current job is paying me badly for my field — it’s not — but more that I was really lucky with my first job, which paid way better than most.)
How did it feel once you paid it all off?
I just paid it off about 3 months ago, and I would say I’m still a little numb, actually. Oh, I celebrated — I even told some IRL friends about it, although discreetly — but it still feels pretty fragile to me and probably will until I’ve managed to build up more cash savings.
Right after I paid it off I had a $600 medical bill, which I was able to cash-flow, but only barely. It’s definitely a huge relief to look at Mint and see “$0” under both loans and credit cards, because it means that if I somehow lost my job tomorrow at least I wouldn’t have any outstanding obligations, but it’s surprisingly anticlimactic because I immediately had to turn my attention to pouring all my extra money into savings so that I can try not to fall right back into debt again if something happens!
What practical tips do you have for people looking to pay off their debt?
I would start by establishing a payoff schedule that’s challenging and pushes you to cut costs and make sacrifices, but isn’t so spartan that you can’t really stick to it. Set an end date, whether that’s 18 months or 10 years from now, and say “I will pay X dollars a month” in order to achieve that. Then at the beginning of every month, or after every payday, or whatever — make that payment first. Do it at the same time you pay rent and other essential bills. After those things are done, then you can move on to spending whatever money is left over on food and entertainment and whatever else.
The point is, don’t wait until the end of the month and put “whatever is left over” towards your debt — it’ll go down much more slowly that way! Another tip is to make lifestyle changes that push you. I chose to live with a housemate, which saves me hundreds of dollars a month in rent. Your version of that might be different (maybe it’s cutting cable or selling your gas-guzzling car) but the point is, look for big recurring costs you can save a lot on. Sure, saving your latte money is nice, but that’s maybe $100 a month, whereas I’m saving about $400 every month on rent/utilities costs vs living solo. All of that is put to my financial goals. Go for the big win, basically.
What steps are you taking now to stay out of debt or to build wealth?
I’m side hustling a little to help my retirement fund. As far as my regular income, though, I’m still doing what I learned to do over the course of paying my debt off — paying myself first. I’m putting all that debt repayment money towards my savings instead.
My emergency fund is still tiny (only $1000) so I’m working on that first, along with my new 403(b). I make the e-fund contribution at the beginning of the month, like I said above; it’s the priority so it gets paid before I get my fun money for the month.
To keep me motivated, I’m keeping up with my blog; I absolutely love posting net worth updates every month; it’s my reward for doing well at my goals! I have a dedicated savings account for the e-fund so it’s not mixed in with my spending money even a little bit.
Finally, I’m trying to plan ahead for things like medical bills and car repairs; I don’t know exactly what will happen but I know *something* will so I’ve set aside some money in my budget every month for those things. My hope is that those funds will build up over time rather than be constantly drained, so that I’m ready when something big happens!
To learn more about C and her journey from “deep in debt” to “debt free and building wealth”, you can find her blogging at www.thesingledollar.com.
Note: This is part of a series called “Debt Success Stories” which features people who were able to pay off a significant amount of debt. If you have a Debt Success Story I would love to hear about it. Please visit the contact page to let me know the details.